Federal Reserve Bank of Cleveland: http://www.clevelandfed.org

The economy continues to expand at a slow pace. The recent subpar growth rates, together with the pattern of productivity and hours worked, suggest that the trend level of real GDP is growing slower than in the past. Here, we investigate this issue, looking for evidence on the current and long-run growth rates of the real GDP trend. Read more

10.09.2012

Regional Differences in Science and Engineering Schooling and Employment

Differences in human capital across regions are associated with differences in economic performance. For example, many studies have documented that regions with higher human capital, typically measured in terms of educational attainment, experience higher income growth. The correlation is attributed to many channels, but key among them is the view that more educated locations are more innovative and can take better advantage of new technologies. Read more

10.05.2012

Consumer Finances and a Sustainable Recovery

Ozgur Emre Ergungor and Patricia Waiwood

Three rounds of quantitative easing since the official end of the recession 39 months ago testify to the fact that the economy is languishing. To evaluate the possibility of a sustainable recovery in the near future, we take a closer look at consumer finances. Read more

09.25.2012

A Snapshot of Bank Soundness

Samuel B Chapman and Kristle R Cortes

Recent reports indicate that banks are on much sounder footing than they were a few years ago. We take a look at the condition of 10 banks that are the peers of Bank of America, which was one of the first of the large banks to repay its Troubled Asset Relief Program funding in 2010. The latest data on asset growth, deposits, and loan loss reserves suggest that overall bank health is slowly on the road to recovery. Read more

09.21.2012

Balance Sheet Implications of New Fed Policies

Bill Bednar and Todd Clark

Since the target federal funds rate bottomed out near its zero lower bound during the financial crisis, the Federal Reserve’s balance sheet has been an important policy tool. This week the FOMC announced another round of asset purchases, which will further expand the balance sheet. We take a look at recent changes in the size and composition of the balance sheet and project those forward to the end of the year. Read more

09.11.2012

Long-Term Population Changes Within Cities

Daniel Hartley

How have population growth and population decline played out within cities over the past 30 years? A look at how the high- and low-priced neighborhoods of cities that were large in 1980 have grown and shrunk since then. Read more

09.04.2012

Delaying Enrollment and College Completion

Jonathan James

The effect of a postsecondary education on labor market outcomes has been a central focus for policymakers and researchers. One reason for the interest is that significant evidence suggests that workers with a postsecondary education, in particular a bachelor’s degree, enjoy higher wages and higher job satisfaction. However, only about 30 percent of individuals who start a postsecondary education will actually attain a bachelor’s degree. One of the strongest correlates with bachelor degree completion is the timing of postsecondary education. Read more

08.31.2012

Behind the Strength in Exports

Pedro S Amaral and Margaret Jacobson

The ratio of exports to GDP has been growing at a far faster rate in the current recovery than in an average one. Why are exports growing at an unprecedented pace while the rest of the economy remains sluggish? Read more

08.31.2012

Policy Rule Changes

Charles T Carlstrom and Samuel B Chapman

One area of active interest for both policymakers and market watchers is to find a simple rule (or rule of thumb) that approximates Fed policy on interest rates. John Taylor came up with the first such rule in 1993, and since then, a number of variations have been proposed. One variation suggests that the Fed responds positively to increases in inflation above target (currently 2 percent) and negatively when unemployment increases. Read more

08.29.2012

Bank-Holding Companies in the Last Decade

Bill Bednar and Mahmoud Elamin

Generally speaking, a bank-holding company (BHC) is a company that controls more than 25 percent of the voting securities of an FDIC-insured bank. One exception is if the company is holding the securities for trade. Such companies are not classified as BHCs. In this article we discuss the condition of U.S. BHCs since 2001. We focus on those with assets of more than $500 million. Read more

08.29.2012

The Great Recession’s Impact on Hours Worked and Employment

Dionissi Aliprantis

Employers can respond to the economy by hiring, not hiring, or firing employees, as well as by choosing the hours worked by employees. It is not immediately obvious how these choices might be related over a given time period. To investigate the impact of the Great Recession on hours worked we turn to Current Employment Statistics (CES) survey data from the Bureau of Labor Statistics. Read more

08.09.2012

Is Moderate Growth the New Normal?

Since the end of the recession, the economy has expanded at a slow pace. It has missed out on the period of rapid recovery that typically follows business cycle troughs, and it has been growing quite steadily at rates lower than in past expansions. We examine the factors behind these subpar growth rates and present some evidence that moderate growth may be the norm going forward. Read more

08.06.2012

A Look at Ohio?s Foreign-Born Population

Guanyi Yang

The number of immigrants living in the United States has been growing at a faster pace in recent decades. The diversity of countries from which these new residents have emigrated has been increasing as well. We take a closer look at the foreign-born residents of Ohio, to learn where they are from and how they perform in the labor market based on their earnings profile, educational attainment, and career choices. Read more

08.06.2012

Beyond the Unemployment Rate: Long-term Unemployment

Emily Burgen and Murat Tasci

The unemployment rate has been above 8 percent since February 2009, the longest stretch since the 1950s. But what stands out about the current recovery’s labor market, beyond the stubbornly high unemployment rate, is the pervasiveness of long-term unemployment. This post describes this problem in detail and explores how it might be related to the persistently high unemployment rate. Read more

08.03.2012

Municipal Borrowing Trends in the Fourth District

Andrew Scarponi and Stephan Whitaker

One distinct characteristic of the recent slow recovery has been financial strain of state and, especially, local governments. What does this strain imply for municipal borrowing? Are state and local governments canceling or postponing capital projects because they fear taking on new interest payments? Read more

08.02.2012

A Tale of Two Types of Credit

Emily Burgen, Yuliya Demyanyk and Matthew Koepke

Since the financial crisis in late 2008, the level of total real consumer credit outstanding has fallen 4.5 percent. While it has recaptured some of the ground it lost during the recession, growth has not been equally split between revolving and nonrevolving credit, its two components. In fact, while nonrevolving consumer credit has expanded past its pre-financial crisis levels, revolving credit has declined through the economic recovery. Read more

08.02.2012

The Yield Curve and Projected GDP Growth, July 2012

Over the past month, the yield curve has gotten flatter, as short rates stayed nearly even and long rates dropped. The three-month Treasury bill inched up to 0.10 percent, and the ten-year rate dropped back to 1.47 percent. The slope dropped to 137 basis points. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 0.6 percent rate over the next year, and based on calculations using the yield curve, we estimate that the expected chance of the economy being in a recession next July is 11.7 percent. Read more

08.01.2012

Troubled Waters and the Bank of England’s Funding for Lending Scheme

Owen F Humpage and Margaret Jacobson

With economies drifting into the doldrums, central banks are looking for ways to hoist more sail. Recently, the Bank of England unfurled its Funding for Lending Scheme, an economic jib of sorts that hopes to spur household and business loans. The Scheme will begin on August 1, 2012, and continue through 2013. Central bankers around the globe are keenly interested. Read more

07.23.2012

The Evolving State of the Fed’s Security Holdings

Bill Bednar, John B Carlson and John Lindner

Prior to the financial crisis, the Fed’s security holdings were restricted to a mix of Treasury securities, which consisted of a combination of short-term bills and longer-term notes and bonds. At the start of the crisis, the balance of Treasury bills fell. This dip turned out to be the beginning of a major evolution in the composition of the Fed’s portfolio. As a result of the crisis, the Fed’s security holdings have been completely transformed. Read more

07.16.2012

A Slow Recovery in the Banking Sector

Matthew Koepke

Ever since the National Bureau of Economic Research called an end to the Great Recession in June 2009, the U.S. banking system has been engaged in a slow and fragile recovery. The most recent data from the Federal Deposit Insurance Corporation (FDIC) shows that while the system is on the mend, FDIC-insured institutions still face headwinds. Read more

07.10.2012

How Many U.S. Mortgages Are Linked to Libor?

Guhan Venkatu

The London interbank offered rate, or Libor, has served as a baseline for many bank-to-bank transactions in U.S. dollars since it was established in 1986. It has also increasingly become the basis for many financial transactions not occurring between banks. As such, recent revleations about Libor-fixing will affect these transactions, which include many U.S. mortgages. Read more

07.06.2012

Durable Goods Consumption and GDP

Daniel R Carroll

Purchases of durable goods make up a small part of overall consumption, but forecasters pay attention to it because it is thought to give a hint about where GDP is headed in the next quarter. The latest numbers show durables consumption is positive, but a look at households’ expectations of their future income suggests a continuation is not necessary assured. Read more

07.06.2012

Fourth District Labor Markets: Cleveland?s Puzzling Data

The labor markets of different regions have not all recovered from the Great Recession at the same rate. Some states have much lower employment levels than before the recession, some have gained, and most have had no growth. But in some areas, like Cleveland, the situation is a little unclear. The picture changes depending on which data source is considered. Read more

07.02.2012

Survey Measures of Inflation Expectations

Mehmet Pasaogullari

The inflation question on everyone’s mind is whether the recent pace of inflation will continue in the short and long term. To gauge what households and professional forecasters think about that, we look at two surveys: the University of Michigan’s Survey of Consumer Attitudes and Behavior (UM expectations) and the Philadelphia Fed’s Survey of Professional Forecasters (SPF expectations). Read more

06.29.2012

Variation in State GDP Growth during the Recovery

The recovery from the U.S. recession has not been uniform across the 50 states. Recent data from the Bureau of Economic Analysis through 2011 show that 20 states still had levels of Gross Domestic Product (GDP) below their 2007 levels. Over this same period, the United States as a whole experienced essentially breakeven growth, with an overall rise of less than one-tenth of a percent. Read more

06.27.2012

Consumer Deleveraging May Be Over

Ozgur Emre Ergungor and Patricia Waiwood

The recently published results of the Federal Reserve’s triennial 2010 Survey of Consumer Finances show that many families cut up their credit cards during the financial crisis. The number of families holding credit card debt of any amount declined to its lowest levels in more than 20 years. Meanwhile, families in the lowest-income percentile have been reporting an increasing use of installment debt since the 2007 survey and the Senior Loan Officer Opinion Survey recently reported a sharp increase in demand for consumer loans. Read more

06.26.2012

The Yield Curve and Projected GDP Growth, June 2012

Over the past month, the yield curve has flattened, as short rates stayed even and long rates fell. The three-month Treasury bill stayed steady at 0.09 percent, and the ten-year rate dropped back again, coming in at 1.64 percent. The slope dropped to 155 basis points. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 0.6 percent rate over the next year, and based on calculations using the yield curve, we estimate that the expected chance of the economy being in a recession next June is 9.7 percent. Read more

06.22.2012

A Quick Look at Fed Forecasting

Todd Clark and John Lindner

During the Chairman’s recent press conferences, the first topic that he addressed was the Federal Open Market Committee’s (FOMC) set of economic projections. He outlined the Committee’s expectations for economic growth, inflation, and the unemployment rate for the next few years and the longer run. The numbers that he presented, however, offer only a snapshot of the Committee’s views. Read more

06.05.2012

A Historical Perspective On the Current Recovery

Pedro S Amaral and Margaret Jacobson

The second estimate for real GDP growth in the first quarter of 2011 came in at 1.9 percent, a decrease from the previously estimated 2.2 percent. By now, everybody is well-aware that the current recovery is a slow one. We examine the evolution of GDP in this recession to the average post-WWII recession. Read more

06.05.2012

Wide Variation in House Price Decline across the Country

Kyle Fee and Daniel Hartley

Since the peak of the housing market, which occurred in mid-2006 according to the Case-Shiller 10-city and 20-city composite indices, housing markets across the United States have seen large declines in home prices. However, some areas have fared much worse than others. Read more

06.04.2012

Weekly Hours Worked: Another Recession Casualty

Jonathan James

Many aspects of the labor market have yet to return to their pre-recession levels in the economic recovery. Employment and labor force participation have been the main focus for analysts, but another important and related measure of the health of the labor market is weekly hours worked for those employed. Read more

05.30.2012

Subdued Business Lending

Matthew Koepke and James B Thomson

The financial crisis and subsequent recession caused bank profitability to decline significantly. Banks responded to the crisis by reducing lending. However, as the economy muddles through the recovery, there are signs that banks’ profitability is improving, potentially creating a more favorable lending environment. Read more

05.24.2012

The Yield Curve and Projected GDP Growth, May 2012

Over the past month, the yield curve has flattened, as short rates stayed even and long rates fell. The three-month Treasury bill inched up to 0.09 percent, and the ten-year rate dropped back below 2 percent. The slope dropped to 165 basis points. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 0.7 percent rate over the next year, and based on calculations using the yield curve,we estimate that the expected chance of the economy being in a recession next May is 8.7 percent. Read more

05.23.2012

On Target

Brent Meyer

The CPI was flat in April, largely because falling gasoline prices offset modest increases elsewhere in the basket. But the real news in the latest price report was that on a year-over-year basis the CPI is up just 2.3 percent as of the end of April, continuing its slowdown since it hit a high of 3.9 percent last September. Read more

05.22.2012

Measuring Small Business Employment over the Business Cycle

Dionissi Aliprantis and Emily Burgen

Many analysts have tried to understand why the pace of job growth has been so slow since the end of the Great Recession. This issue has focused attention recently on the hiring behavior of small businesses during the recovery. It turns out that simply measuring the hiring practices of small businesses can be difficult. Read more

05.17.2012

Monetary Policy and the FOMC’s Economic Projections

Charles T Carlstrom and John Lindner

The Federal Reserve has further increased its transparency over the last couple of years. The inclusion of interest rate projections allows a rare opportunity to see whether a simple “guide post” might accurately describe participants’ views on appropriate policy. Monetary policy is frequently discussed in terms of guideposts, and often these are presented in the form of Taylor-type rules. Read more

05.08.2012

Labor Markets: Glass Half Empty…Glass Half Empty

The April 2012 employment report offered a mixed bag of results. The household survey reflected a mixed picture, as well. Over the course of the last four years, the size of the labor force has essentially remained constant, even as the civilian noninstitutional population (16 years and older) has grown by over 9 million individuals. Read more

05.04.2012

A Return to Lower Levels of Investment Activity

Investment activity accelerated during the 1990s, remained elevated until the 2007 recession, and then returned to lower, more typical levels. We explore whether this pattern has anything to do with the slowness of the current recovery. Read more

05.02.2012

Regional Differences in Household Income

Nelson Oliver and Stephan Whitaker

Statistics on the distribution of personal income by region can be helpful context for thinking about many important questions. Can lower labor costs help the Southern states to lure corporate operations? Do the higher salaries of the Northeast and West attract Midwestern college graduates? Does everyone in the Northeast benefit from its concentrations of finance and government employment? Has immigration pulled down wages in the West? Read more

05.01.2012

Bank Capitalization

Ben R Craig and Matthew Koepke

Over the last 20 years, the financial sector has become larger, more complex, and more interconnected. While this expansion has facilitated the development of new financial products and markets, it has also introduced new risks to the financial system and the economy in general. Going forward, capital regulation will likely play an important role in adding stability to the financial system. Read more

05.01.2012

Strategically Distressed

Yuliya Demyanyk and Matthew Koepke

It has been over two-and-a-half years since the National Bureau of Economic Research called an end to the recession that began in late 2007. Nonetheless, the recession’s negative effects on the U.S. housing market remain. One potential headwind facing the housing market is foreclosures. Read more

04.27.2012

Slow Employment Recoveries, Monetary Policy, and Expected Inflation

John B Carlson and John Lindner

Since the early 1990s, employment growth has been persistently slow coming out of recessions. This phenomenon, often described as a “jobless” recovery, has become increasingly severe over the past two decades, posing new challenges for monetary policy. Achieving maximum employment, along with price stability, is one of the two policy objectives mandated by Congress for the Federal Reserve. Read more

04.25.2012

Is the Renminbi Challenging the Dollar’s Reserve Status?

Owen F Humpage and Margaret Jacobson

Since its inception in 1999, the euro has gained ground against the dollar as an official reserve—a currency that foreign governments hold to facilitate their transactions in foreign-exchange markets. Persistent trade deficits since 1982, coupled with a broad-based depreciation of the dollar after 2002, have encouraged a marked shift out of dollars and into euros. The Great Recession and the European sovereign debt crisis have recently stalled the euro’s ascent as the key reserve currency, but not the diversification out of dollars. The intriguing, but unanswered, question is: what currencies are now replacing the dollar, the euro, and the other traditional reserve currencies in these portfolios? Read more

04.24.2012

The Yield Curve and Projected GDP Growth, April 2012

04.06.2012

Income Growth in the Fourth District since 1970

Guhan Venkatu

For the 100 largest U.S. metro areas in 1970, two factors explain almost a third of the variation in median household income growth over the subsequent 40 years: the share of overall manufacturing employment in 1970 and the percentage of the population with bachelor’s degrees in 1970. Read more

04.05.2012

An Elusive Relation between Unemployment and GDP Growth: Okun’s Law

Emily Burgen, Brent Meyer and Murat Tasci

The slow pace of GDP growth has some people wondering how sustainable the recent improvement in the labor market is. Implicit in their suspicion is the idea of Okun’s law, which is essentially an empirical relationship between the growth rate in real GDP and changes in the unemployment rate. But looking at this relationship in a few ways, we find that the labor market is improving at a rate consistent with the rate of recovery in GDP. Read more

04.05.2012

Market-based Inflation Expectations

Mehmet Pasaogullari and Patricia Waiwood

Some prices and price indexes have shot up recently, but measures of core inflation have remained low. For more insight into where the rate of inflation is likely to head in the future, we look at a couple of measures that tell us how markets are currently pricing future inflation. These measures are inflation swap rates and breakeven inflation rates. Read more

04.03.2012

New York Fed Breaks Up with Maiden II

Bill Bednar and Mahmoud Elamin

Back when the financial crisis was in full swing, a number of simultaneously exploding problems struck at AIG (American International Group). The Fed’s response was swift and varied. One particular response was Maiden Lane II, created to deal with problems in AIG’s securities-lending program. The last securities in Maiden Lane II were sold off at the end of February 2012. Did the American public and New York Fed benefit from the investment? Read more

03.23.2012

The Yield Curve and Projected GDP Growth, March 2012

03.20.2012

The Shrinking Government Sector

Daniel R Carroll

The run-up in government expenditures during the recent financial crisis has led some to believe that growth in the government sector is far outpacing the economy. While it is true that the ratio of government expenditures-to-GDP increased precipitously during the crisis (reaching 21.1 percent in 2009), it has been trending down sharply since. At 19.7 percent as of the fourth quarter of 2011, it has given back 70 percent of its post-crisis increase. Read more

03.16.2012

European Liquidity Strains

John Lindner

After peaking last summer, the level of reserves held at the Federal Reserve has declined. Given the public’s concerns about elevated reserve levels and all the new tools the Fed has developed for managing reserves, it is important for policymakers to understand where those reserves have gone. A quick examination of the Fed’s balance sheet, and the Fed’s data on the balance sheets of commercial banks, confirms that the likely culprit was liquidity strains in Europe. Read more

03.16.2012

The Availability and Profitability of Credit Cards

Ozgur Emre Ergungor and Patricia Waiwood

Following a peak at 14 percent in the first quarter of 2010, credit card interest rates have fallen over the past two years. When interpreted jointly with the increasing balances, this development suggests that credit is becoming more available to consumers. We take a look at the factors that affect the availability and cost of credit cards. Read more

03.07.2012

Educational Attainment and Earnings

Dionissi Aliprantis and Margaret Jacobson

Median household income growth has slowed in the United States over the last decade. The earnings of full-time workers play an important role in income trends, and the median earnings for all workers have grown more slowly since 2000 than they did in the 1990s. Read more

03.06.2012

Do Leading Indicators Help Predict GDP Growth Rates?

Pedro S Amaral

The latest GDP estimate leaves real GDP growth for 2011 far below 2010’s growth rate and further emphasizes the uneven nature of the current recovery. This high degree of uncertainty surrounding the recovery has economists grasping at straws when it comes to explaining short-term growth. The Conference Board’s Leading Economic Index (LEI), an aggregate of 10 leading indicator data series, is closely watched for possible turning point patterns in output. Read more

03.02.2012

Starting Off on the Wrong Foot: Early Careers and High Unemployment

Jonathan James

Younger workers typically face a higher rate of unemployment than older workers, and after the last recession, the gap has only grown wider. That’s a concern because workers are thought to acquire skills when they first enter the labor force that set them up for better life-time earnings and employment outcomes. Read more

02.24.2012

Distressed Sales and Housing Prices

Daniel Hartley

Has the housing market stabilized, or are housing prices still on a downward trajectory? Recent data suggest that the answer to that question depends upon where the home is and whether it—or nearby homes—are being sold in a “distressed” sale (foreclosure, REO, or short sale). Read more

02.24.2012

The Yield Curve and Projected GDP Growth, February 2012

02.23.2012

Adjustments to Seasonal Factors Alter Inflation Estimates

Brent Meyer

Every February the BLS updates the seasonal factors for each component in the Consumer Price Index (CPI) to reflect developments during the previous year. Also, every other February, the BLS updates the weights (or relative importance values) of all the component series to reflect expenditure changes. Usually, these revisions don?t change much, but this year, they led to a modest change in the near-term trend of a few key underlying inflation measures. Read more

02.17.2012

Play by the (Taylor) Rules

Charles T Carlstrom and John Lindner

The interest rate projections released after the January Federal Open Market Committee (FOMC) meeting were another step toward increased Fed transparency. In the projections, each member of the FOMC described how he or she would conduct interest rate policy, given economic conditions in January and how they expect conditions to develop going forward. However, connecting the dots between the future interest rate policy and the economic data still leaves room for interpretation. Can we ascertain some of the important variables that Committee members are implicitly responding to? Estimating a Taylor rule can help with the interpretation. Read more

02.06.2012

Behind the Decline in Labor’s Share of Income

Labor income, which includes wages, salaries, and benefits, has been declining as a share of total income earned in the U.S. Here, we look at the cyclical and long-run factors behind this development. Read more

02.06.2012

Job Creation by Small and Large Firms over the Business Cycle

Emily Burgen and Murat Tasci

The Great Recession caused establishments of all sizes to make significant cuts in their employment. To get a picture of those losses, we turn to the Business Employment Dynamics (BED) data collected by the Bureau of Labor Statistics (BLS). BED data provides gross job gains and losses at the establishment level going back to the early 1990s and breaks down the data to several size categories. We aggregate those categories into three classes to simplify our analysis: small firms (1-49 employees), medium size firms (50-499), and large firms (500 and more employees). Read more

01.27.2012

Loans and Leases in Bank Credit

Ben R Craig and Matthew Koepke

Loans and leases in bank credit are an important measure of economic strength. They serve as an indicator of how quickly the general economy is growing and, more importantly, what areas of the economy are expanding. Loans and leases are recovering much more slowly during this recovery than they did in the previous two. But balances in commercial and industrial loans have grown faster. Read more

01.26.2012

More Transparency, But Not a Crystal Ball

John B Carlson and John Lindner

On January 3, the Fed released the minutes from the December Federal Open Market Committee (FOMC) meeting and revealed that it will begin publishing the Committee’s interest rate projections. The goal of this action is to provide more transparency in the policymaking process. However, there are limitations to the information these types of projections provide. Examining the experiences of some foreign central banks illustrates what conclusions might and might not be drawn from the new data. Read more

01.25.2012

Are Consumers More Eager to Borrow?

Yuliya Demyanyk and Matthew Koepke

Consumer credit serves as an important indicator as to where the economy is heading. Generally, consumers borrow more when they are more certain about their financial prospects and less when they are less certain. Consequently, changes in consumer credit may indicate how confident consumers are about the economy and their desire to consume in the future. Read more

01.24.2012

Pass-Through and the Renminbi’s Appreciation

Owen F Humpage and Margaret Jacobson

Since mid-2010, the Chinese renminbi has steadily appreciated against the dollar. Many here hope that a more expensive renminbi will induce a proportional rise in the prices of Chinese goods and take some of the sting out of China’s competitive bite. They may, however, be disappointed. The relationship between exchange—rate changes and import prices is often loose—more like a swing dance than a tango. Read more

01.24.2012

The Yield Curve and Projected GDP Growth, January 2012

01.19.2012

Trends in Housing Prices per Square Foot

Stephan Whitaker

To attract job candidates and firms to a region like the Fourth District, recruiters routinely point out the affordability of living in their area, especially the cost of housing. The pitch that “you can get more house for your dollar here,” is aimed especially at growing families with mid-range incomes. The states and metro areas of the Fourth District still enjoy an advantage over places like San Francisco and New York on a price-per-square-foot basis. However, the post-boom prices in formerly expensive cities like Tampa and Las Vegas are now below those of Columbus and Cleveland. Read more

01.13.2012

Consumption Taking Longer to Respond to Downturns in GDP

Daniel R Carroll

Consumption makes up roughly 70 percent of GDP as measured by the National Income and Product Accounts. The consumption category as a whole tends to follow overall GDP fairly closely over the business cycle, but the three main subcategories of consumption—durable goods, nondurable goods, and services—differ considerably in their relationship to GDP over the cycle. During the Great Recession beginning in 2007, consumption behaved more like it did in the 2001 recession than in the previous ones. The cause for the delayed response of consumption can be identified by examining the three principal subcategories of consumption. Read more

01.09.2012

Some Improvement in the Labor Market